WASHINGTON — The Internal Revenue Service announced Wednesday that it is giving tribal governments until the end of 2011 to issue the first $1 billion tranche of tribal economic development bonds, in an effort to save the tribes from having to forfeit any unused allocations at year-end.

Any tribal government that received an allocation under the first of two $1 billion tranches now has until June 30 to issue the bonds. The original deadline for issuance allocated under the first tranche was the end of this year. The issuers also can apply in writing to the IRS to have a second six-month extension to the June 30 deadline, meaning they would have until the end of 2011 to issue bonds, the IRS said.

The first tranche of $1 billion of bonds was allocated to 58 different projects in September 2009. The second and final $1 billion tranche of the bonds was allocated to 76 projects in February. Tribal governments now have until the end of 2011 to issue all of the bonds.

Native American governments that received allocations from the first tranche must apply for the additional six month extension by March 31. The request must include a copy of the allocation letter the tribe originally received from the IRS, an explanation of why the extra extension is needed, and the tribe’s statement that it reasonably expects to issue the bonds on or before Dec. 31, 2011.

The IRS plans to confirm requests for any additional extensions by May 31, 2011.

Bond lawyers said yesterday that the extension is helpful to tribal governments, who typically need more time to put together bond financings.

“It often does take a longer time for tribal governments to go through their internal processes to get bonds issued and to then find buyers for the bonds, so this does not surprise me,” said Linda Schakel, a partner at Ballard Spahr LLP.

Tribal economic development bonds were created by the American Recovery and Reinvestment Act. The bonds, which can be issued either as tax-exempt debt or direct-pay Build America Bonds, can be used by tribes for any projects that could be financed by a state or local government, other than gaming facilities or projects off the reservation.

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